EHI Retail Institute releases “Online-Payment 2019“ study
With the September 14 deadline fast approaching, online retailers are racing to adapt their online stores to comply with the new regulations of the revised Payment Services Directive (PSD2). After this date, they require Strong Customer Authentication (SCA) for credit card and PayPal payments. Unfortunately, not every surveyed e-commerce retailer has implemented SCA via two-factor authentication (2FA) at this point. “Many merchants are still not informed enough. What’s more, many of them seem to be shying away from implementation, as they fear a drop in user-friendliness for their online customers will have a negative impact on their business,” explains Michael Gerling, CEO of EHI. This was a finding of the Institute’s “Online Payment 2019” study, which was published today.
Online retail must catch up
Despite the fact that the regulatory requirements of the PSD2 have been known since January 2018, there is still a need to catch up when it comes to education. As a result, 4 out of 5 retailers feel inadequately informed or are still in the process of getting up to speed with the subject.
Only two-thirds of surveyed retailers have laid the technical foundations for implementing the requirements in their online store.
Fear of high shopping cart abandonment rate and customer drop-off
Sixty-one percent of surveyed merchants predict the implementation of 2FA will make the online payment process even more complex. “Even though Strong Customer Authentication increases the security of electronic payments, it comes at the expense of user-friendliness,” says Christoph Wenk-Fischer, CEO of the German E-Commerce and Distance Selling Trade Association (bevh). “Having said that, we hope customers will appreciate the enhanced security measures, resulting in improved consumer trust in online retailers.” Yet many merchants are still fearful of negative implications. Due to more complexity for consumers, 82 percent of respondents anticipate an increase in shopping cart abandonment and expect more questions from customers thanks to the change in payment processes. That’s why 68 percent also worry about an increased need for high-touch customer service. Meanwhile, 39 percent of surveyed retailers predict high costs pertaining to payment processing.
The experience of the merchants who already offer the 3D Secure credit card payment process shows that these fears are justified. After implementation at their stores, 40 percent have already seen high levels of cart abandonment at checkout if consumers selected to pay by credit card.
Avoiding unintended consequences
Due to the anticipated negative impact of SCA, nearly half of the surveyed e-commerce companies have decided to take advantage of exemptions to the 2FA mandate. By contrast, more than one-third of merchants have decided in favor of adapting their online stores to comply with the new requirements. The remaining retailers (16 percent) have not yet given the matter any thought.